More Articles

The Dispatch E-Edition

All current subscribers have full access to Digital D, which includes the E-Edition and
unlimited premium content on Dispatch.com, BuckeyeXtra.com, BlueJacketsXtra.com and
DispatchPolitics.com.
Subscribe
today!

Enlarge ImageRequest to buy this photoAP file photoAbercrombie & Fitch blamed the first-quarter loss on inventory shortages and bad weather. Uproar over the CEO’s 2006 comments added to the turmoil.

Abercrombie & Fitch said inventory shortages and bad weather hurt sales in the first
quarter, which resulted in a loss for the local retailer. In addition, it lowered its outlook for
the full year, which sent its shares tumbling yesterday.

Abercrombie posted a loss of $7.2 million, or 9 cents per share, an improvement from the $21.3
million loss, or 25 cents a share, reported in the same quarter a year ago.

“The first quarter proved to be more difficult than expected due to more significant inventory
shortage issues than anticipated,” in addition to such issues as poor weather during the first part
of the quarter, CEO Michael Jeffries said.For the full year, Abercrombie revised its predicted
earnings downward, to between $3.15 and $3.25 a share, less than Wall Street expectations of
$3.50.

In response, Abercrombie stock closed down $4.35, or 8 percent, at $50.02, making the retailer
one of the biggest losers for the day in the stock market.

The disappointing results came on top of several weeks of turmoil for the teen retailer, which
has been the focus of online anger about comments made by Jeffries in 2006 in which he cited the
chain’s desire to appeal to “cool” kids as a reason that Abercrombie does not make women’s clothing
in any size above “large.”

That uproar was followed by news that a federal judge in Denver was contemplating an injunction
against the company after ruling earlier that nearly 250 of the chain’s clothing stores are
unfriendly to the disabled.

“This is a story with lots of moving parts that all seem to be stalled out at the moment,”
Howard Tubin, an analyst with RBC Capital Markets, said in a note to investors.

The recent uproar over issues unrelated to the chain’s merchandise isn’t the only thing that
might be affecting sales, said analyst Brian Sozzi of Belus Capital Advisors. “My view: Traditional
teen apparel retailers (are) very out of favor,” he wrote.

Sales in all its major chains fell: 13 percent for Abercrombie & Fitch, 5 percent for
abercrombie kids and 18 percent for Hollister Co.

Abercrombie hopes it can solve its difficulties in dealing with inventory flow. “We feel we’re
in better inventory position going into second quarter, that we have more depth behind key items,”
Jeffries said.

In addition to dealing with the inventory issue, Abercrombie officials said they are making
progress on a cost-cutting program, which the company says will allow it to save $35 million to $55
million a year.

The company also is working on updating its long-term strategic plans, including its first
global market-research study, which it expects will be helpful as it continues its international
expansion, even as it closes some underperforming stores in the United States.

During the quarter, Abercrombie opened four Hollister stores overseas, including its first store
in Australia. It plans to open Abercrombie & Fitch flagship stores in Seoul, South Korea, and
Shanghai, as well as approximately 20 Hollister stores internationally this year.

As previously announced, Abercrombie plans to close 40 to 50 stores in the United States this
year as leases expire.

Abercrombie also plans to open a small number of international multibrand outlet stores during
the year. Two outlet stores in the United Kingdom are “both doing well,” said Jonathan Ramsden,
chief financial officer of the company. “We’re looking at them primarily as test stores.”